Speaking in Manchester, Mr Brown defended his party as ‘pro-enterprise, pro-business and pro-competition', citing the one million additional firms as proof. He urged the world to look beyond the ‘arithmetic of statistics' at "the local businessman who's taken on two local teenagers as apprentices" thanks to the Government's enterprise policies. The FPB's Chief Executive, Phil Orford, found the claim to be "incredible", contradicting the Government's own evidence.

"While the number of small businesses has indeed grown from 3.7 to 4.7 million since 1997, during the same period the number of businesses actually employing people has remained at 1.2 million," he said. "These official figures are available from the Department for Business, Enterprise and Regulatory Reform (BERR). In future, Mr Brown should remind himself of the arithmetic of his own statistics when he is called to defend his record on supporting small businesses."

Mr Brown's claim echoes a statement made in January 2008 by the then Competitiveness Minister, Stephen Timms, who lauded the ‘record' number of new businesses created under Labour.

However, the FPB believes that the figure of one million more small businesses is more reflective of the Government's initiative to encourage existing small firms and one-man bands to officially register as businesses in the formal economy, rather than a surge in new employers.

A study carried out by the European School of Management (ESM), commissioned by the Shadow Chancellor, Tatton MP George Osborne, claimed that small-business growth is in decline. In its interim report, the ESM said that the proportion of businesses achieving an annual turnover in excess of £1 million in their first five years fell dramatically from 29% in 1998 to 16% in 2006.

Only 6.8% achieved a turnover of more than £7 million in their first five years; a far lower rate than the 16.3% elsewhere in Europe. Since 2002, this figure has continually fallen in the UK, while rising across Europe.

The report said that, while there were more small businesses registered in 2006, compared to 2001, the cost of complying with employment regulations, which increases as the business grows in size, is causing many firms to struggle.

"I would be interested to know how many of those ‘new' firms are micro businesses and one-man bands that have now officially registered," said Tracy Hoather, of courier firm Sameday Plc in Knutsford, Cheshire. "Beyond former employees now employing themselves, how many actual jobs have these businesses created?"

In its report, the ESM argued that analysing growth, not counting the total number of firms, is the best way to judge the strength of small businesses in the UK. It said that a skills shortage and rising taxation also acted as significant barriers to growth.